From: Arlene Elyce Clemmons [arlene@txcm.com]
Sent: Friday, May 07, 2004 3:14 PM
To: rule-comments@sec.gov
Subject: File No. S7-11-04
May 7, 2004
Jonathan G. Katz,
Secretary, Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609.
Gentlemen:
I am opposed to the SECís proposed rule known as File No. S7-11-04 mandating a
redemption fee of 2% on the sale of mutual fund shares held for less than 5
days.
I see this as an over-reaction to the Mutual Fund after-hours trading scandal.
The problem with this ruling is that a mandatory redemption fee is not
necessary and will only hurt individual investors. It also means that
individual investors would have less control over directing their own
investments, and could cause the investor loss of value if unable to sell
their fund prior to market declines. It also unjustly punishes the investor,
who for reasons beyond his control must liquidate his investment within the 5
day period.
The SEC incorrectly labeled the illegal activities of mutual funds as 'market
timing'. Mutual funds already have 30, 60 and sometimes 90 day hold periods
that they self-impose on themselves by rules currently in place, and no
additional legislative or governmental action is required. What if, for
example, you were given a recommendation to purchase a particular fund, but
when purchasing that fund you made a mistake and bought the wrong fund.
Currently, you would be able to immediately sell your incorrect purchase and
then buy whatever your correct intention was, less whatever fees or
restriction the mutual fund already had in place. Funds have all the tools
they need to control abusive trading of their fund shares. They need only use
them to be effective. The solution is not mandatory redemption fees. If the
SEC ruling passes, the investor will be forced to pay a 2% fee to the fund
company. This fee is equivalent to imposing a tax on the mutual fund
investor.
This proposed legislation is short-sighted, over-reactive, and just over-all
bad for the individual investor, who the SEC is supposed to be protecting. I
urge you to withdraw this bad legislation and consider all those who would be
unjustly and adversely affected.
Sincerely,
Arlene Clemmons